Lifestyle 2000TM

CORPORATE LONG TERM CARE

POINT OF SALE

PRESENTATION

Lifestyle 2000TM

C-Corporations & Long Term Care Insurance

The Last Great Tax Advantage

SLTC00-17

Lifestyle 2000TM

How to use corporate

dollars to fund a federally

tax-qualified employee

benefit.

LONG TERM CARE INSURANCE

Lifestyle 2000TM

What is Long Term Care?

Long Term Care is assistance

provided to someone who has a

condition or illness that limits

his or her ability to perform normal daily activities.

Lifestyle 2000TM

Long Term Care Includes:

Assistance with Activities of

Daily Living (ADL’s)- Bathing- Eating- Dressing- Toileting- Transferring- Continence

Lifestyle 2000TM

Who Will Pay for Long Term Care?

Lifestyle 2000TM

Long Term Care Myths

My Children Will Take Care of Me

Medicare Pays for Long Term Care

Medicaid Will Take Care of the Bill

I Will Never Go to a Nursing Home

Lifestyle 2000TM

What are the chances of needing Long Term Care?

The total risk of a 65 year old

entering a nursing home at some point in life is

49%(1)

(1) Long Term Care: Knowing the Risk, Paying the Price, Health Insurance Association of America

Lifestyle 2000TM

•Protecting Current Assets

>Even younger clients have a current need for Long Term Care Insurance

>Long Term Care Utilization:

3% are under age 18

40% are ages 18 to 64

57% are over age 65(2)

(2) U.S. Accounting Office, 1995

Lifestyle 2000TM

Friends and family may not be in a financial position to help pay for the care you require when you need it. Currently, the national average for one year in the nursing home is estimated to cost $41,000(3) as a national average. If we consider even a conservative inflation increase of 5% per year, within the next 25 years, one year’s stay in a nursing home could more than $100,000.(4)

(3),(4) The American Health Care Association, September 1998

Lifestyle 2000TM

Long Term Care Insurance Helps You To:

•Maintain Independence

•Control the Quality of Your Care

•Have Peace of Mind for Your Future

•Preserve Your Assets

Lifestyle 2000TM

Our Purpose• To help you move pre-tax

corporate dollars out of your company.

• Deduct those dollars as a usual business expense.

• Make those dollars available to your heirs.

• Provide you or your key employees lifetime protection against the high cost of long term care.

Health Insurance Portability and Accountability Act

Mostly aimed at Group Medical Insurance

Revolutionized corporate executive benefit Long Term Care Insurance sales

Defined tax-deductible LTC Insurance premiums

Defined amount of tax-free LTC benefits

Lifestyle 2000TM

HIPAA

Lifestyle 2000TM

All reimbursement plan benefits are tax-free.

All indemnity plan benefits spent on qualified nursing care are tax free.

Tax free benefits from an indemnity plan can exceed nursing care costs.

However, indemnity benefits above nursing care expense AND above $190 per day (adjusted for inflation) are taxable.

HIPAATax Free Benefits

Lifestyle 2000TM

The IRS has determined that Long Term Care, as an employee benefit, does not have to follow ERISA guidelines. This means that the employer can “pick and choose” who will participate in this benefit program.(5)

This benefit can create “Golden Handcuffs” for key employees and a “Golden Parachute” for business owners.

This benefit allows the Corporation to move business dollars into the hands of key executives.

What the IRS says:

(5) IRS Section 105(b)

Tax Deduction for Self Employed(6)

Tax qualified long term care insurance plans only

Not eligible for cafeteria plans Eligible for MSA accounts Deduction limits

– 60% (2000 and 2001)– 70% (2002) – 100% (2003)

Deductible amount is lesser of premium paid or age related amount

– 18-40 - $ 220– 41-50 - $ 410– 51-60 - $ 820– 61-70 - $2200– 71+ - $2750

Per insured person, based upon age at the end of the taxable year. Other 40% is eligible for the 7.5% of Adjusted Gross Income for un-reimbursed medical expenses. 100% of premium paid through an MSA is an eligible expense. Consult your tax professional.

Lifestyle 2000TM

(6) IRC Sec. 213(d)(10)(A)

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C-Corporation

- 100% Deductible S-Corporation, LLC,

Partnerships and Sole Proprietorship.

- 60% (2000/2001) Deductible on the owner(s)

- 100% Deductible on other employees

- Excess carried over to personal tax return subject to limitations

What is your deduction?(7)

(7) IRS Section 162(1)(2)(c)

Lifestyle 2000TM

All Qualified Long Term Care Insurance premiums and expenses for employees are fully deductible by employer without limitation.(8)

Premiums not included in W-2, even for owner-employee.(9)

Benefits are not taxable(10)

Employer can offer to select employees.(11)

Qualified long-term care insurance and expenses

(8), (9), (10), (11) HIPPA 1996, P.L. 104-49L, IRC Sec. 106(a), IRS Sec. 7702B(a)(2), IRS Sec. 105(b)

Lifestyle 2000TM

Exceptional executive benefit

Uses pre-tax corporate dollars

Lower age - lower premiums

Lower age - insurability is less concern

Tax advantages not available individually

Paid-up options fund post-retirement

Endorsed Group premium discounts

The “C-Corp” Advantage

Lifestyle 2000TM

LTCI cannot be part of a Section 125 plan(12)

No C Corp cap on premiums that HIPAA did impose upon others(13)

No C Corp limit on limited payment premium plans(14)

Can be viewed as a way to increase executive retirement income

“C” Corp Tax Qualified LTCI

(12), (13), (14) HIPPA 1996, P.L. 104-94L

Lifestyle 2000TM

Limited-Pay Premium options

Allows pre-payment of future premiums during specified period using pre-tax dollars

There is a high cost of waiting to buy

Pre-funding Retirement Expense

Lifetime Benefits 5% Compound Benefit Increase Rider $200 per day Indemnity Benefits Estate is protected by not having to

liquidate estate assets in order to pay for long term care.

Comprehensive Benefits 10-Pay Premium Option Retirement income increases since

you are not using retirement dollars to pay for long term care

Lifestyle 2000TM

Example Benefits for a Key Employee

Lifestyle 2000TM

Tax Qualified 5% Compound Interest

Inflation rider Comprehensive Nursing

Facility Care and HCBC Indemnity benefit option 10-Pay and Single-pay

premium options

Underwriting related pricing advantage

Lifetime elimination periods of 0, 30 and 90 days

Joint Waiver of Premium Enhanced HCBC option Endorsed Group Premium

Discounts

Comprehensive Benefits

Lifestyle 2000TM

Premiums paid for LTC are nottaxable to Executive

IRC 162Benefits are Tax Free

up to $190 per dayIRC 7702B d(4)

CompanyPurchases “LTC Insurance” on

Key Employees

ESTATE gets refund of premiumupon death of insured(s)IRC 7702B (b)2c(1)(E)

“LTC Insurance” is health insuranceIRC 7702B

Premiums Deductible IRC 162

Insured hasLifetime

LTCprotection

C-Corporation LTC Tax Treatment

Lifestyle 2000TM

Coverage Provided by Policy Series S-6000-P, underwritten by The State Life Insurance Company, Indianapolis, IN. Policy benefits and options vary by state and some of those listed here may not be available in your state.

For costs and further details of coverage, including exclusions and reductions or limitations and the terms under which the policy may be continued in force, contact your State Life agent.

The information provided here is not intended as legal or tax advice. We recommend that you consult with an attorney, accountant or tax advisor regarding the tax implications of purchasing long term care insurance.